Tax administration fails to be assertive

KATHMANDU, JAN 25: 

Over the past few years, the success of the tax administration has been measured in terms of revenue collection figures which will have an adverse impact in Nepal’s economic sector, according to experts. 

The tax administration has failed to intervene in a meaningful manner after the completion of the multi-billion Value Added Tax (VAT) fraud committed by certain businesses by producing fake invoices, a source at the Finance Ministry said, adding that the Inland Revenue Department (IRD) has been more focused on its target despite the provision of self-compliance in the country’s tax regime. 

The existing policy has envisaged the role of the tax administration as a facilitator in revenue mobilisation rather than as a collector, he informed. 

“However, the tax administration has merely been playing the role of a collector.” He said that the tax administration has failed to intervene in areas of revenue leakages significantly. 

Private business firms have started evading their tax liabilities using highly intelligent approaches, he said. 

“But the revenue administration has failed to empower its officials in a competent manner.”

He blamed the revenue administration for failing to bring some crucial issues under scanner. Income splitting, bogus trading, unnatural equity-to-debt ratio, and issue of VAT credit are some crucial issues among others. 

Director general at the Department of Revenue Investigation (DRI) Janma Jay Regmi accepted the blame that no visible intervention was made by the revenue administration after the investigation of the VAT scam. 

Both Inland Revenue Department and DRI have been trying to identify the most potential areas of revenue leakage to intervene, he said, adding that Department of Revenue Investigation is optimistic about achieving a positive result in a few months. 

The source, however, denied the claim. “The Inland Revenue Department had started investigating some big companies suspecting them of having evaded revenue but nothing concrete has happened,” he said.

Virtual account system of businesses is another problem which the tax administration has failed to bring under its scanner, he claimed. “The trend of keeping account details in a foreign country has thrived in the country,” he said. “The revenue administration has failed to control it.”

Source: THT